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ROUTES OF FDI IN RETAIL IN INDIA:
- By incorporating a wholly owned company in India.
- By incorporating a subsidiary of a foreign company in India.
- By a merger or acquisition with an Indian enterprise.
- By participating in an equity joint venture with another investor or another enterprise.
PERMITTED FDI LIMITS IN INDIA:
- Aviation sector up to 49%
- Broadcast sector 74%
- Multi brand retail up to 51%
- Single brand retail it is 100%
- Multi brand retail up to 51% (subject to approval by the respective state)
BRIEF DISCUSSION ON FDI IN RETAIL IN INDIA:
FDI in retail in India is now permitted and is also being promoted by the Government of India. FDI stands for Foreign Direct Investment which is an economic process under which a foreign company invests in India for permitted business activities categorized as retail activities under the policy of the Government of India.
Foreign Direct Investment in India was earlier allowed only in single brand however on 14/9/2012 the Government decided to allow the FDI in multi brand retailing also. The FDI in retail may be encouraged and allowed by the Government by granting several exemptions and incentives which will affect the Indian companies in the same field.
As per the policy, the FDI in the aviation sector is allowed up to 49%, broadcast sector up to 74%, multi-brand retail up to 51% and for single-brand retail it is 100%. The choice of allowing multi-brand retail up to 51% has been left to the respective states of India.
FDI in India is increasing and in 2010 it was 50.8 Billion USD in India as per the estimates of UNCTAD. The said policy of FDI is formulated under the FEMA Act which regulates and controls the flow of foreign funds in India. The main features of the FDI in retail in India can be dealt with in any of the following manners:
- By granting tax exemption by way of law corporate tax and individual income tax rates for the FDI bodies.
- By granting tax holidays and several other types of tax exemptions, concessions etc.
- Br granting preferential tariffs to the FDI bodies.
- By establishing Special Economic Zones.
- By establishing Export Promotion Zones for the FDI incentives.
- By allowing and establishing bonded ware houses.
- By investment financial subsidies.
- By granting soft loans or loan guarantees to the FDI companies.
- By allowing free land and land subsidies to the FDI companies.
- By granting infrastructure subsidies.
- By allowing relocation and expatriation to the FDI companies.
- By providing R&D support.
- By establishing a branch office in India.
There is a lot of debate and discussion on the good and bad impacts of FDI in retail sector in India but we must not forget that the growing economies of the world are opening up for the foreign investors and with the advent of FDI in retail and more particularly multi-brand trading the production process of the retail goods in India is going to be revamped and revitalized by the pumping of foreign funds.
The interplay of various global economic factors acting globally will determine the fate of the FDI in retails sectors in India but at present given the economic conditions of the country it is certainly going to improve the retail sector.
FDI in retail in India is an important subject in the business economy of the country and has generated lot of debate on the subject recently. Over and above all, FDI in retail will certainly bring India on the global front as it is a big market for retails which through time would encourage the manufacturing and trading sectors in retail in India given the population pyramid of the country.
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